Expense Management Software Is NOT Enough

By Jessica Kirk07.12.17

We’re big fans of travel and expense management software. Solutions like Concur, Certify, and Workday have enabled companies of all sizes to streamline their expense reporting process through automation. Having a system like this in place will undoubtedly help to increase employee productivity and traveler satisfaction.

Today’s expense report software solutions make it easy for employees to submit expense reports that comply with policy. With a click of button, employees can book travel with pre-trip approval, capture images of their receipts, and automatically build their expense reports on the go. This also makes it easy for T&E program managers to handle approval workflow and enforce policy at the time of expense report submission. This is useful in helping honest employees to correct errors in their expense reports.

But what about dishonest employees? These employees are fewer, but they’re damaging.

According to the Association of Certified Fraud Examiners (ACFE), expense fraud accounts for 14% of all asset misappropriation fraud schemes. Even large organizations with company-wide expense reimbursement policies and T&E management software in place are not immune to expense fraud. Yet, most companies continue to mistakenly believe their T&E management software is enough to spot fraud schemes, waste, and misuse.

The reality is that the expense audit tools built into today’s expense software solutions are limited to identifying policy violations such as exceeding limits on hotel rates, meals, transportation, etc. These solutions have built-in preventive controls based on spending thresholds and receipt limits. When sales rep Joe submits a dinner receipt that is twice the allowed amount, they flag it and prevent Joe from submitting his expense report without addressing the error. Joe fixes the expense code on his report to note that it was a client dinner and his manager signs off. The expense is therefore within policy so the problem is solved. Joe is reimbursed and a record of his expense report is stored in the system.

On a scheduled basis, T&E management software solutions can pull a random sample of past expense reports to be audited. This is the “fail-safe” for spotting missed errors. But the sample and manual methods used by audit teams fail to detect behavioral patterns of fraud, waste, and misuse. Audits of this nature truly just match receipts to expenses over a short time period; they don’t automatically consider other contextual factors. Who is Joe? What’s his role? Who else was at the dinner with Joe? What do Joe’s spend practices look like over time? How does Joe’s spend compare to others of the same role? Does the date on Joe’s dinner happen to coincide with his vacation days tracked in HR? Does Joe have an abnormal number of client dinners? Without context and visibility into Joe’s historical transactions, you may miss the bigger picture.

Sampling certainly has a valid role in testing controls, but it is not effective for automating fraud detection and prevention. When it comes down to stopping fraudsters, companies need deeper data analysis that allows every transaction to be quickly examined and automatically flags employees at an increased risk of fraud.

To fully protect against T&E fraud, you need both preventive controls like spending thresholds and the detective controls of AI technology. Your expense report software will streamline your process and save your employees time, but it is not enough.